press release

Unocal's Spirit Energy 76 scores 64% exploration success rate on GOM shelf; adds new gas discoveries

Sugar Land, Texas, Jan. 8, 1999 - Unocal Corporation's Spirit Energy 76 unit recorded a 64-percent success rate in its core Gulf of Mexico shelf exploration program during 1998, including four new discoveries during December. For the full-year, Spirit Energy had 21 discoveries on the shelf.

Preliminary information indicates that Spirit Energy replaced about 100 percent of its 1998 production with new reserves (excluding sales), increased production from year-ago levels, and continued to develop additional attractive exploration prospects.

"The success in 1998 validates Unocal's commitment to revitalizing and investing to grow our Gulf of Mexico exploration and production business," said Roger C. Beach, Unocal chairman and chief executive officer. "The record is testimony to the quality of the asset base and the strength of the teams we've put together at Spirit Energy."

Beach added that Spirit Energy's shelf exploration prospects are predominantly natural gas and deliver production quickly, making them extremely attractive given the weakness in crude oil prices. Spirit's finding and development costs for the shelf in 1998, based on preliminary data, was $1.30 - $1.35 per thousand-cubic-feet-equivalent, significantly lower than many other Gulf of Mexico shelf operators.

Ken Butler, general manager for Spirit's Gulf of Mexico shelf and onshore exploration, noted that Spirit Energy starts 1999 with an inventory of more than 130 economically attractive drilling prospects, about 2-1/2 times the opportunities that Spirit Energy had two years ago.

"Lower rig and service costs, a gas-focused prospect inventory, another year of experience for the new Spirit Energy team, and our goal of driving down drilling time should make for similar success in 1999," Butler said.

New shelf discoveries

In December, Spirit Energy recorded four successful exploration wells, all of which are expected to go on production in the first quarter of this year.

The discoveries included Mobile 918 No.1 in the Norphlet play offshore Alabama marking the beginning of a multi-year drilling program on this prolific trend. The well encountered an estimated 250 feet of gas pay at a depth of 22,800 feet. Production is expected to begin in February at a gross flow rate of 25 to 35 million cubic feet per day (mmcfd). Spirit Energy is operator and has a 45.65-percent working interest. Co-venturers are Chevron U.S.A. Production Company (45.65% W.I.) and Fremont Energy, L.P. (8.7% W.I.).

Another discovery was offshore Louisiana, where the West Cameron 278 LeMans well discovered 53 feet of gas pay at a depth of 13,000 feet. The well is expected to be placed on production in March at a rate exceeding 25 mmcfd. Spirit is the operator with a 70-percent working interest. Basin Exploration, Inc., holds the remaining 30-percent working interest.

Deepwater GOM

In addition to the GOM shelf and onshore program, Unocal has solidified its position as a significant player in the Gulf of Mexico deepwater.

"Our inventory of high quality deepwater prospects gives us the leverage to meet or exceed very aggressive goals for reserves," said Jack Schanck, president of Spirit Energy 76. "We are currently participating in two deepwater exploration wells, and our goal is to achieve the same cost advantages for Spirit-operated deepwater wells that we enjoy with our drilling program in Indonesia and Thailand."

The company has developed cost-effective drilling techniques that it believes can reduce the cost of Gulf of Mexico deepwater exploration wells by one-half or more, compared with conventional drilling approaches.

Unocal is a leading global oil and gas exploration and production company with significant pipeline and power plant project developments worldwide. Spirit Energy 76 is the company's Lower 48 U.S. oil and gas exploration and production unit.

Forward-looking statements about reserves, future exploration and development activities, production rates and costs in this news release are based on assumptions concerning geological, market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially.

Updated: January 1999